E Factor NSE SME IPO review (May apply)

•    EFEL is engaged in event management-related services including tourism, concerts etc.
•    It has posted galloping financial performance for the last three fiscals.
•    Based on its FY23 performance, the issue appears fully priced. 
•    Coffins are emptied with five bonus issues so far. 
•    Well-informed investors may park funds for the medium to long-term rewards. 

ABOUT COMPANY:
E Factor Experiences Ltd. (EFEL) is engaged in providing the consumers and community with event experiences, event services, technology-based permanent and semi-permanent multimedia light and sound installations and specialized turnkey event assignments, wedding management, private and social event solutions. Its portfolio of services includes turnkey assignments in the form of Government commissioned Tourism Events and Festivals, techno-cultural light and sound shows, Sporting Events and Contests, Conferences, Mega Ground Concerts, Televised Events, private and social events like wedding and anniversary celebrations, etc.

The company takes pride in organizing and curating various turnkey events and experiences like "The Pushkar Fair" in the year 2015-19, converting the traditional Snake-Boat Races into league format in the year 2019, creating a beach destination with its Eco retreat project at Konark or the other Eco retreat destinations at Bhitarkanika, Odisha in 2021.

It offers customers a wedding management process that is designed based on customer requirements, which ensures a hassle-free wedding management experience. Recently in Fiscal 2023, the company has diversified its services of social events in countries such as Barcelona, and Spain. It has also entered into adventure tourism under the brand name "Sky Waltz" through its subsidiary which also owns 2 yachts and 11 hot air balloons. The company has also partnered with the hospitality and leisure business of its associate company. As of the filing of this offer document, it had 32 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book-building route IPO of 3456000 equity shares. It has announced a price band of Rs. 71 - Rs. 75 per share of Rs. 10 each and mulls mobilizing Rs. 25.92 cr. at the upper cap. The issue opens for subscription on September 27, 2023, and will close on October 03, 2023. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME. The issue constitutes 26.41% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO funds, it will utilize Rs. 2.00 cr. for investment in the subsidiary, Rs. 13.00 cr. for working capital, Rs. 3.50 cr. for repayment/prepayment of certain borrowings, and the rest for general corporate purposes. 

After reserving 174400 shares for the market maker, the company has allocated not more than 1640000 shares for AIBs, not less than 492800 shares for HNIs, and not less than 1148800 shares for Retail investors. 

Hem Securities Ltd. is the sole lead manager and Maashitla Securities Pvt. Ltd. is the registrar of the issue. Hem Group's Hem Finlease Pvt. Ltd. is the market maker for the company. 

The company has issued the entire equity capital at par value so far and has also issued bonus shares in the ratio of 9 for 1 in March 2006, 3 for 1 in March 2008, 3 for 1 in March 2012, 22 for 21 in October 2018, and 9 for 5 in March 2023. The average cost of acquisition of shares by the promoters is Rs. NIL, and Rs. 0.08 per share. 

Post-IPO, EFEL's current paid-up equity capital of Rs. 9.63 cr. will stand enhanced to Rs. 13.09 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 98.16 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total revenue/net profit of Rs. 9.91 cr. / Rs. 1.23 cr. (FY21), Rs. 57.00 cr. / Rs. 2.53 cr. (FY22), and Rs. 119.45 cr. / Rs. 7.61 cr. (FY23). The company has posted galloping performance for the last three fiscals. However, its PAT margins have marked a roller-coaster ride.

For the last three fiscals, EFEL has reported an average EPS of Rs. 5.00 and an average RoNW of 79.55%. The issue is priced at a P/BV of 6.56 based on its NAV of Rs. 11.44 as of March 31, 2023, and at a P/BV of 2.66 based on its post-IPO NAV of Rs. 28.22 per share (at the upper cap).  

If we attribute FY23 earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 12.89

The company has posted PAT margins of 19.85% (FY21), 4.47% (FY22), and 6.38% (FY23). 

DIVIDEND POLICY:
The company has paid a dividend of 0.02% for FY21 and FY22. It adopted a prudent dividend policy in March 2018 based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer documents, the company has shown Touchwood Entertainment as its listed peer. It is trading at a P/E of 70.32 (as of September 25, 2023). However, they are not comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 31st mandate from Hem Securities in the last three fiscals (including the ongoing one). Out of the last 10 listings, all are listed with premiums ranging from 1.82% to 90% on the date of listing.